Northwestern Journal of Law & Social Policy Volume 4 | Issue 1 Article 3 Winter 2009 What Works Is Work: Welfare Reform and Poverty Reduction Ron Haskins Recommended Citation Ron Haskins, What Works Is Work: Welfare Reform and Poverty Reduction, 4 Nw. J. L. & Soc. Pol'y. 31 (2009). http://scholarlycommons.law.northwestern.edu/njlsp/vol4/iss1/3 This Article is brought to you for free and open access by Northwestern University School of Law Scholarly Commons. It has been accepted for inclusion in Northwestern Journal of Law & Social Policy by an authorized administrator of Northwestern University School of Law Scholarly Commons. Copyright 2009 by Northwestern University School of Law Volume 4 (Winter 2009) Northwestern Journal of Law and Social Policy What Works Is Work: Welfare Reform and Poverty Reduction Ron Haskins∗ ¶1 This is an essay about how the 1996 welfare reform law and other policies contributed to the sharpest decline in child poverty since the early 1970s. The story is told in the context of the nation’s long struggle to reduce poverty and the factors that have made it so difficult to make progress against poverty. These factors involve both forces over which individuals have little or no control and factors over which they have almost complete control. To a large extent, the achievement of welfare reform was to use both positive and negative incentives—carrots and sticks. The sticks encourage, cajole, or force able-bodied mothers to exploit the factors over which they have control and enter the labor force. The carrots reinforce their initiative with government-provided benefits that support poor and low-income workers. I argue that this combination of carrots and sticks is the most successful strategy for reducing child poverty that the government has yet devised. The strategy enjoys solid support from taxpayers, which suggests that innovative expansions that further increase personal responsibility, increase income, and reduce poverty would receive public support. Unfortunately, there are clear downsides to the new policies, raising the issue of whether creating outcomes that include increased work, increased income, and reduced poverty for many offset the decline into deep poverty of a few. ∗ Senior Fellow in the Economic Studies Program at the Brookings Institution, 202-797-6057, [email protected]. Vol. 4:1] Ron Haskins I. INTRODUCTION Figure 1 Poverty Rate, 1959-2006 25 20 15 10 Percent inPoverty 5 0 3 7 1 3 5 61 65 69 71 73 75 77 79 81 83 85 87 89 91 95 99 9 9 9 9 9 9 9 9 9 9 9 9 9 9 99 9 99 9 00 00 00 1959 1 1963 1 1967 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 Source: U.S. Census Bureau, Historical Poverty Tables, Table 2, "Poverty Status Year of People by Family Relationship, Race, and Hispanic Origin: 1959-2005." ¶2 Consider the surprising lack of progress against poverty in the last half-century or so.1 Figure 1 shows that poverty fell precipitously during the 1960s, rose slightly for a few years, and then fell to its lowest level ever, a little over eleven percent, in 1973 and 1974. Over the next three decades and more, poverty moved up and down in rough correlation with the economy, but never again approached the low achieved in the mid- 1970s. 1 The official poverty measure in the United States suffers from numerous flaws. It is based on the cost of food in the 1950s and is adjusted only for family size and inflation. Flaws include the failure to consider regional differences or rural/urban differences in the cost of living, the failure to include many types of income from government benefits, and the failure to consider work-related costs such as child care and transportation. The National Academies, based on the work of an expert task force, published a thorough review of these and other problems and issued specific recommendations for revising the poverty measure. See NATIONAL RESEARCH COUNCIL, MEASURING POVERTY: A NEW APPROACH 25–69 (Robert T. Michael & Constance F. Citro eds., 1995). Although there has been abundant discussion in Washington, D.C. of changing the official poverty measure, so far it has not been changed. The level of poverty in any given year may be misleading because the official definition is flawed, but poverty trends (like those discussed here) are more or less unaffected because a common definition has been followed over the years. For the official definition of poverty and several other possible definitions, see generally id. See also Rebecca Blank, Presidential Address: How to Improve Poverty Measurement in the United States, 27 J. POL’Y ANALYSIS & MGMT. 233, 233–54 (2008); U.S. Census Bureau, How the Census Bureau Measures Poverty, http://www.census.gov/hhes/www/poverty/povdef.html (last visited Feb. 22, 2009). 31 NORTHWESTERN JOURNAL OF LAW AND SOCIAL POLICY [2009 Figure 2 Federal and State Spending on Means-Tested Programs, 1968-2004 700 583 600 500 400 300 200 Total Spending (billions of 2004 dollars) 100 89 0 2 6 8 0 2 4 2 4 70 74 82 84 86 96 98 00 9 97 9 97 9 9 9 98 99 9 9 0 00 1968 1 1 1 1 1978 1980 1 1 1 1 1 199 199 1 1 2 2 200 Source: Congressional Research Service, Cash and Noncash Benefits for Persons with Year Limited Income, RL33340, March 27, 2006. ¶3 This lack of progress is especially surprising in view of the tsunami of government means-tested programs and the blizzard of spending on these programs (Figure 2). As the breadth of these programs expanded—eventually to include cash, medical, nutrition, housing, social services, and other categories of programs—and spending grew as measured in constant dollars, as a percentage of all federal spending, and as a percentage of Gross Domestic Product (GDP), the nation made no progress against poverty.2 If anything, there was a slight increase in poverty between the early 1970s and 2006. Why? 2 Since 1968, federal spending on means-tested programs has increased from 6% to nearly 19% of total federal outlays and from less than 1.2% to nearly 3.6% of GDP. Author’s calculations based on VEE BURKE, CONG. RESEARCH SERV., CASH AND NONCASH BENEFITS FOR PERSONS WITH LIMITED INCOME: ELIGIBILITY RULES, RECIPIENT AND EXPENDITURE DATA, FY2002-FY2004 (2006). 32 Vol. 4:1] Ron Haskins A. Changing Family Composition Figure 3 Percent of Children Living in Single-Parent Families, 1960-2006 30 28.0 25 20 15 Percent of of Children Percent 10 9.1 5 0 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 Source: U.S. Census Bureau, Current Population Survey, at Year www.census.gov/population/socdemo/hh-fam/ch1.xls. ¶4 It is by now old news that the American family has undergone profound changes in recent decades. Marriage rates fell while divorce rates increased to a high level in the early 1980s and have remained high since.3 Non-marital birth rates continue to grow beyond all previous experience as cohabitation continues to increase.4 The upshot is that at any given moment nearly thirty percent of American children live in a single-parent family, and over the course of their childhood far more spend some time in a single- parent family (Figure 3).5 These discouraging figures are even worse in the case of minorities, especially black Americans. About seventy percent of black children are born into a single-parent family6 and around half of the rest experience a divorce.7 Thus, approximately eighty percent of black children spend at least part of their childhood living outside the context of a married-couple family.8 3 See David Elwood & Christopher Jenks, The Spread of Single-Parent Families in the United States Since 1960, in THE FUTURE OF THE FAMILY 25, 30 (Daniel P. Moynihan, Timothy M. Smeeding & Lee Rainwater eds., 2006). 4 Id. at 33–35. 5 U.S. CENSUS BUREAU, Living Arrangements of Children Under 18 Years Old: 1960 to Present, in CURRENT POPULATION SURVEY TABLE CH-1 (2008), available at http://www.census.gov/population/socdemo/hh-fam/ch1.xls. 6 NAT’L CTR. FOR HEALTH STATISTICS, U.S. DEP’T OF HEALTH AND HUMAN SERV., BIRTHS: FINAL DATA FOR 2004, 61 tbl. 20, available at http://www.cdc.gov/nchs/data/nvsr/nvsr55/nvsr55_01.pdf. 7 See U.S. CENSUS BUREAU, Survey of Income and Program Participation, Table 3: Marital History for People 15 Years and Over, by Age and Sex, for Black Alone: 2004, available at http://www.census.gov/population/socdemo/marital-hist/2004/tab3-blackalone.xls. 8 If around seventy percent of black children are born outside marriage and about half of the remainder 33 NORTHWESTERN JOURNAL OF LAW AND SOCIAL POLICY [2009 Figure 4 Poverty in Female-Headed and Married-Couple Families with Children, 1974-2006 50 Female-Headed Families Married-Couple Families 45 40 35 30 25 20 Percent in Poverty 15 10 5 0 1974 1978 1982 1986 1990 1994 1998 2002 2006 Source: U.S. Census Bureau, Historical Poverty Tables, Table 4, “Poverty Status of Year Families, by Type of Family, Presence of Related Children, Race, and Hispanic Origin," at www.census.gov/hhes/www/poverty/histpov/hstpov4.html. ¶5 Figure 4 shows one reason why scholars and policymakers should be concerned about the growing number of children in single-parent families. In most years, poverty rates are four or five times as high in female-headed families as in married-couple families.